Americans with accounts at Citibank & Bank of America in Belize should be worried as the IRS moves in !

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Click IMAGE for US Compliant Solutions – (Photo Credit: Craig Warga/Bloomberg)

IRS Hunts Belize Accounts, Issues John Doe Summons To Citibank, BofA

A federal judge issued an order allowing the IRS to serve a John Doe summons to reveal Americans with offshore accounts in Belize. Targets are Belize Bank International Limited (BBIL) and Belize Bank Limited (BBL). The IRS wants to know who has accounts at BBIL, BBL, and others. But the order entitles the IRS to get records of correspondent accounts at Bank of America and Citibank.

BBL, BBIL, and Belize Corporate Services (BCS)–which sells off the shelf companies–are based in Belize. But the John Doe summonses direct Citibank and BofA to produce records identifying U.S. taxpayers with accounts at BBL, BBIL, and affiliates, including correspondent accounts to service U.S. clients. Transactions in correspondent accounts leave trails the IRS can follow. The IRS obtains records of money deposited, paid out through checks, and moved through the correspondent account through wire transfers.

The IRS already knows about these entities from the IRS offshore disclosure program, OVDP. And now the IRS can ferret out depositors who didn’t step forward. It shows the push me pull you of the many ways the government has of gaining secret bank records. Whistleblowers, cooperating witnesses, the OVDP treasure trove of data and more. A John Doe summons to UBS AG produced records on the now defunct Swiss bank Wegelin & Co.’s correspondent account at UBS.

A John Doe summons to Wells Fargo sought records of the Barbados-based Canadian Imperial Bank of Commerce FirstCaribbean International Bank. The government has it down to a science. Remember, coupled with a key whistleblower, in 2008, a John Doe summons blew the lid off the hushed world of Swiss banking. A judge allowed the IRS to issue a John Doe summons to UBS for information about U.S. taxpayers using Swiss accounts. That eventually led to Americans scrambling for cover and UBS forking over names and a $780 million penalty.

Full story continued here..,

Contract Based Personal Contribution Retirement Plans NOW AVAILABLE for non resident US Taxpayers in Secure Compliant TAX FREE International Jurisdictions!

Everything U.S. Expats Need to Know About IRS Tax Forms (But Were Afraid to Ask)

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Many brave Americans overseas attempt to do their own tax returns, and often inadvertently end up learning about tax forms they may not have been filing or filed incorrectly. Unfortunately, many taxpayers who work with paid professionals also have ended up missing forms in their tax returns. The remainder of this article is dedicated to some of the most common tax forms that are generally part of an expat-American tax return. Whether you prepare your own return or work with a tax professional, you should be familiar with these forms.

Common Overseas Tax Forms

Most professional tax preparers will be familiar with these forms, and most consumer tax-preparation software packages will support them:

Form 2555 & 2555- EZ: These forms are for calculating your Foreign Earned Income Exclusion (FEIE) and to calculate your Foreign Housing Exclusion or Deduction. If you meet certain foreign residency requirements, you may be able to exclude up to $99,200 of earned income in 2014 and a portion of your foreign housing expenses from U.S. income tax. Note that this exclusion does not apply to self-employment taxes. If you are self-employed abroad, you are still subject to U.S. Social Security taxes unless you live in one of the 25 countries with which the U.S. has a Social Security Totalization Agreement. The FEIE is generally advantageous to use when income tax rates in the foreign country are lower than in the U.S. and/or your total earned income is below the exclusion threshold.

Form 1116: This is the Foreign Tax Credit form and it is used to claim a credit against your U.S. income tax for income taxes paid in the foreign country. This credit applies both to foreign earned income (wages, self-employment income, etc.) and unearned income (interest, dividends, capital gains, rents, etc.). This is generally the most beneficial form to use for residents of countries with high income tax rates, those with children eligible for the additional child tax credit and those interested in contributing to U.S. retirement plans (traditional and Roth IRAs, SEPs, solo 401(k)s, etc.)

FBAR Form FinCEN 114: This form is independent of the tax return and a separate filing requirement. The FBAR applies to any U.S. person who owns, has beneficial interest or signature authority over foreign financial accounts that exceed $10,000 in the aggregate in value at any time during the year. If you have any foreign bank accounts, this also has to be disclosed on Part III of Schedule B, whether the FBAR is required to be filed or not. FinCEN 114 must be e-filed and cannot be mailed, with the absolute filing deadline on June 30, with no extension possible.

Form 8938: This form, also known as the Fatca form, is used to report Specified Foreign Financial Assets and the income derived from them. There is some overlap with the FinCEN 114 Form (FBAR), but the filing thresholds are higher, and depend on the taxpayer’s residency and marriage status, with different thresholds for the highest value reached during the year and on the last day of the year. These thresholds range from a low of $50,000 to a high of $600,000.

Other Overseas Tax Forms

Not every tax preparer will be familiar with the forms described below. If any of these forms apply to your situation, you will need to make sure that your preparer is qualified to do the work. Many of these forms are quite complex and require special training to prepare. The IRS, for example, estimates that each Form 8621 requires almost 17 hours of record-keeping and more than 14 hours to prepare. These are the forms that are most commonly missed or filed with errors. The list that follows is illustrative and not comprehensive:

If you received a gift or inheritance from a foreign person, even though it will generally not be taxable in the U.S., depending on the amount, you may have to report it in Form 3520. This form is also used to report transactions that you had with foreign trusts. If you are grantor in a foreign trust, you are likely required to file Form 3520-A in addition to form 3520.

If you run your own business in a foreign country, you may have established a company to conduct your business. Depending on the entity’s classification for U.S. tax purposes, which will be a corporation by default or will depend on the classification election made through Form 8832, you may be required to file Form 8858 if the entity is disregarded; Form 5471 if the entity is classified as a corporation; or Form 8865 if classified as a partnership. Transactions between you and your foreign company may have to be reported on Form 926.

If you live in a country with which the U.S. has an income tax convention, you may be entitled to certain treaty benefits with respect to your foreign retirement accounts, re-sourcing of certain U.S. source income to avoid double taxation, taxation of foreign social security, etc. The treaty-based positions taken in your return may have to be disclosed in Form 8833.

If you have a brokerage account or other investments (including some foreign retirement accounts) in a foreign country, these investments may be classified as Passive Foreign Investment Companies or PFICs, which are subject to special tax rules that are generally unfavorable in nature. Most foreign mutual funds and ETFs are classified as PFICS. Each PFIC you own is reported on a separate Form 8621.

Other forms that could also apply to your situation include Form 5173: Transfer Certificate which is issued by the IRS upon the death of an American citizen overseas, and is a discharge form confirming that all taxes had been paid and which is often required by banks and brokerage firms to release funds to the estate; Form 5472 for certain U.S. corporations with 25% foreign ownership and certain foreign corporations engaged in a U.S. trade or business; and Form 720, Quarterly Excise Tax Return, to report and pay excise taxes on certain foreign life insurance premiums.

Common Tax Forms – With Some Overseas Components

The following forms are common for U.S. taxpayers but also have some international elements to be aware of:

1040: Ultimately all of your income (foreign and domestic) should end up on your form 1040. Americans married to non-Americans may be able to us the Head of Household filing status instead of married filing separately. In some cases adding a non-citizen spouse (and their income and assets) to the U.S. tax return can be beneficial. All dependents on the return, must have a U.S. tax ID number.
1040: – Schedule A: Some expenses related to being overseas may be able to be claimed as itemized expenses such as certain foreign taxes, certain moving expenses and travel, mortgage interest, medical and dental expenses etc.
1040: – Schedule B: Part III of Schedule B has information related to foreign trusts and foreign bank accounts. Make sure you check these correctly.
1040: – Schedule C. If you live overseas and are self-employed, you will still have to file a Schedule C. You may be subject to U.S. Social Security though Totalization Agreements may negate the need for paying into U.S. Social Security. You will also generally be able to contribute to a U.S. solo 401(k) or SEP IRA but these may not be tax-deferred in the country where you live and work.

For more information about overseas tax returns, you should check the IRS’s website, which has thousands of pages for your reading pleasure in a section dedicated to International Taxpayers. A good starting point for any new overseas American is Publication 54: Tax Guide for US Citizens and Resident Aliens Abroad.

Wall Street Journal full article here

100 Swiss Banks Get Ultimatum: Hand Over Americans Or Face U.S. Prosecution

Since 2009, the U.S. has had unprecedented success with ferreting out offshore accounts. It started in 2008 with key court victories against UBS. In 2009, UBS paid $780 million to the IRS and upended Swiss banking forever by handing over Americans. Many other banks followed suit, and the costs keep rising. Recently, Credit Suisse plead guilty and paid a $2.6 billion fine.

Now, from its position of dominance, the Justice Department has made it clear what it wants from the hundred Swiss banks that hurriedly grabbed the DOJ’s settlement deal before January 1, 2014. The U.S. seeks ‘total cooperation’, and that truly means total. Any American names, details, and more. The Justice Department intends to get it all.

The consequences of the Swiss not complying? You guessed it: prosecution. There were 14 Swiss banks under criminal investigation that were therefore ineligible for the deal. Such Swiss banks remain under the dark cloud of a U.S. investigation, including Julius Baer, and Pictet & Cie. Approximately 100 banks took the Justice Department settlement deal before the December 31, 2013 deadline.
image But the terms of the non-prosecution agreement were not available until now, 10 months after these 100 banks signed on.There seemed to be little choice about taking the deal, given what was happening to any Swiss bank that even tried to resist. The U.S. settlement deal broke Swiss banks into several categories, with more serious penalties for the worst offenders.

A key group is the category two banks. They have reason to believe they may have committed tax offences, and they can escape prosecution by detailing their wrongdoing with U.S. clients and paying fines. The draft non-prosecution agreement does not involve guilty pleas or criminal penalties.

However, all banks must report to U.S. authorities any information or knowledge of activity relating to U.S. tax. They must reveal all cross-border activities and close the accounts of Americans evading taxes. The 3 tiers of penalties are vastly better than a full-blown U.S. investigation with potential tax evasion charges. Participating banks are required to provide details on American accounts.

They must also inform on the banks that transferred money into secret accounts or that accepted money when secret accounts were closed. See Signed Joint Statement and Program. Banks that held accounts as of August 1, 2008, must pay a fine equal to 20% of the top dollar value of all non-disclosed accounts. That goes up to 30% for secret accounts opened after August 1, 2008, but before March 2009.

The highest tier of penalties is 50% for accounts opened after that. The 3-tier penalty punishes more recent violators most harshly. Of course, American account holders also remain in the cross-hairs. The U.S. settlement program for banks should not be confused with the IRS programs for Americans seeking to avoid prosecution.

Clearly, U.S. account holders who have not already resolved their issues with the IRS should not waste any time determining which IRS offshore amnesty program is right for them. After all, disclosure is now virtually inevitable, and the banks will presumably bend over backwards to comply. If a banks fails to follow any of the terms of the agreement, it would be void. That means the bank could risk U.S. prosecution.

There is little reason to believe that the U.S. authorities are not deadly serious about this. For depositors and banks alike, disclosure and penalties are vastly better than the alternative. And depositors should beware, since closing foreign accounts is not an alternative to coming clean with the IRS. For Americans who fail to step forward, the IRS and Department of Justice warn of their vast resources.

See original source here for more links to this Forbes article.

Surprisingly Important IRS Deadline? June 30, Here’s Why

You may think tax day is April 15. That’s the annual catharsis of filing and payment for millions of Americans. Yet these days millions of Americans file for the automatic six month extension and actually file closer to the October 15 extended deadline.

There are other tax deadlines, including the automatic 2 month extension (from April 15 to June 15). This applies to Americans outside the country on April 15. It might be tempting to plan an annual overseas jaunt right at April 15th.

imageAnd many people think Tax Day is that magical day every year when statistics show that you transition from working for the government to actually starting to work for yourself. According to the Tax Foundation, this year Tax Freedom Day 2014 was April 21, three days later than in 2013. In 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income.
This year, Tax Freedom Day was April 21, 111 days into the year.

 

Here are four reasons June 30, 2014 is more important.

1. FBARS, also known as FinCEN Form 114 are due. These are annual bank account reporting forms required if you have over $10,000 in foreign accounts any time during the year. They have been in the law since 1970, but were largely ignored for years. In 2009, they emerged as key documents in the IRS battle for offshore accounts. Failing to file FBARs draws higher civil penalties and more severe criminal penalties than failing to file taxes or tax evasion. A key illustration was the case of Mr. Carl R. Zwerner, who had to pay 150% of the value of his Swiss account.

2. June 30 is also the last day to file under the 2012 OVDP, the Offshore Voluntary Disclosure Program. If you miss it, there’s also the 2014 OVDP coming into effect right on its heels July 1st. Yet the new program is somewhat more rigorous. For example, although the main offshore account penalty remains at 27.5% of the highest aggregate account balance, you have to pay it sooner. Under the 2012 OVDP, the penalty is due at the end of the case, when you sign your closing agreement. Under the 2014 OVDP, you must pay the penalty months earlier when you send in your returns. Interest wasn’t payable on that amount under the 2012 OVDP, so the delay—which could be a year or more—was nice.

3. June 30 is the big FATCA rollout. It’s the day when overseas institutions and governments start turning in American account holders. The handover comes in two ways, either to the IRS directly or to their own governments, which in turn relay the information to the US Treasury, which in turn relays it to the IRS. It’s an attenuated process, and the stakes are high. Get ready.

4. June 30 is the last day you can send off your 2012 OVDP application and have it segue into a transitional relief Streamlined submission. This one requires some explanation. June 30 is the end of the 2012 OVDP, but it’s clear the 2012 OVDP will be around for more than the next year. After all, cases in the 2012 OVDP have to work their way through the IRS system.

At the same time, the new 2014 OVDP will be in operation too. The IRS says if you are in the 2012 OVDP and want to apply for the new Streamlined program, you can. After July 1, that evidently won’t work, unless you were already in the 2012 OVDP. Put differently, if you enter the 2014 OVDP say in July, you are in the 2014 OVDP, period.

Alternatively, you could enter the Streamlined program. But if you want to have the protection of the OVDP and the chance to switch to the lower- cost Streamlined program, you need to be in the 2012 OVDP. That means acting by July 1. Plus, joining the 2012 OVDP for this purpose isn’t just a pre-clearance. It means by July 1, 2014, mailing to the IRS Criminal Investigation your voluntary disclosure letter and attachments as described in OVDP FAQ 24. Just making a request for OVDP pre-clearance before July 1, 2014 is not enough.

Why go to all this trouble? The Streamlined program offers the chance of no penalty (outside the U.S.) or a 5% penalty (inside the U.S.). That looks considerably better than 27.5%. You could just apply for Streamlined program after July 1. However, by using the 2012 OVDP and then transitional relief, you might just get the best of both worlds.

Robert W. Wood, Forbes Contributor: “I focus on taxes and litigation”

The crucial implications of FATCA for U.S. Citizens in Hong Kong & Globally including US Air Space!

Cathay to withhold US pilots’ wages for taxes. 

Airline says new laws are forcing it to hand over 30 per cent of salaries to American authorities
Cathay Pacific Airways is to start withholding about 30 per cent of its American pilots’ salary every month and pass the money to the US tax authorities together with the pilots’ personal information this year.

“The US Internal Revenue Service is actively seeking airlines flying into the US to ensure they are fully compliant with all US income tax requirements,” Cathay said. “As an international airline flying into the US, we are working with the IRS on this compliance.”

Yip, an expert on FATCA, said that if Cathay did not comply, the US tax authorities would withhold 30 per cent of its US-source income.

http://www.scmp.com/business/companies/article/1438783/cathay-withhold-us-pilots-wages-taxes

Cathay will start withholding tax from the second quarter of the year.

Cathay will start withholding tax from the second quarter of the year.

A recently signed tax information sharing agreement between the Hong Kong and U.S. governments is an important first step towards a formal, comprehensive intergovernmental agreement (IGA) under the U.S. Foreign Account Tax Compliance Act ( FATCA), said lawyers.

FATCA requires U.S. persons, including those living overseas, to report details of their financial accounts held in other jurisdictions to U.S. tax authorities.
Additionally, foreign financial institutions (FFIs) must report the financial information of their U.S. clients to the Internal Revenue Service (IRS) or face steep penalties.
http://fatca.thomsonreuters.com/wp-content/uploads/2014/04/ASIA-Hong-Kong-U.S.-tax-information-exchange-agreement-signals-a-formal-FATCA-pact.pdf

Last July, the Hong Kong Legislative Council moved to enable Hong Kong to enter into stand-alone Tax Information Exchange Agreements and, more importantly for U.S. persons who have financial accounts there, to sign an “intergovernmental agreement” (IGA) with the U.S. for implementation of the Foreign Account Tax Compliance Act (FATCA).

fatca_hk_us_purpose

FATCA reaches U.S. citizens or residents and entities, such as a corporation or a partnership, in which a U.S. person owns more than a 10% interest.

Beyond the obvious, the reportable accounts include those held in trusts, insurance policies, retirement and stock option plans, and other related foreign structures.

The implications of FATCA, and in particular its withholding and reporting regimes, are wide-ranging for financial institutions, investment entities, and many other global organisations.

— reporting and payment of tax on worldwide income, including investment income earned on financial accounts located outside the U.S.

— disclosure of foreign accounts on tax returns and “FBAR” forms, and of foreign assets on the new Form 8938

— reporting of gifts or bequests from non-U.S. sources, and distributions from and relationships with foreign trusts, as well as interests and certain transactions with foreign corporations and partnerships.

The failure to comply with these requirements can have significant, even potentially catastrophic consequences, including potential criminal prosecution for willful violations and substantial civil money penalties.

A willful FBAR violation can result in a penalty of 50% of the balance of any unreported account(s) per year, and the IRS is increasingly aggressive about this penalty.
Even non-willful conduct can result in substantial monetary sanctions, and the assessment of tax and interest.

– See more at: http://hongkongbusiness.hk/financial-services/commentary/crucial-implications-fatca-us-citizens-in-hong-kong

Who is impacted?

Foreign financial institutions, including Hong Kong based financial institutions and Hong Kong branches of international financial institutions, are all subject to the impending FATCA regime.

Equally impacted are all residents in Hong Kong with U.S. citizenship or U.S. residency status, as the FATCA rules will require compliant financial institutions to disclose their account information to the Internal Revenue Service (IRS).
Additionally, certain non-U.S. account holders will be required to comply with requests from their financial institutions for additional documentation in order to avoid being subject to the 30 percent withholding tax.

Under FATCA, “Foreign financial institutions” (FFIs) include:

  • Banks
  • Private equity funds
  • Hedge funds
  • Institutional investment funds
  • Retirement funds & trusts
  • Insurance companies
  • Securities brokers and dealers

In essence, any non-U.S. organisation that holds, or manages customers’ money is considered an FFI subject to FATCA, irrespective of where it is headquartered or whether or not the shareholding structure is American.

What effect will FATCA have on your business?

Organisations will need to rapidly determine the potential business implications of FATCA and define their compliance strategy accordingly.

Executives should make it a priority to increase their organisation’s FATCA knowledge. 

https://www.kpmg.com/cn/en/services/tax/us-corporate-tax/foreign-account-tax-compliance-act/pages/default.aspx

ABA American Bar Association on a Case Illustrating the US Reporting Liability for Having a Foreign Trust

An example of how the IRS imposed penalties on an estate for the decedent’s, and later the executor’s, failure to properly file the Forms 3520 and 3520-A.

The IRS requires certain U.S. persons to file informational returns to report
their relationships to, and transactions with, foreign trusts. Internal Revenue
Code § 7701(a)(30). This requirement also imposes the responsibility to file
such informational trust returns on the estates of some deceased U.S. persons.
Informational returns are just that, used to report certain information, but not
to directly impose taxes.
This article specifically explores the effects of these filing requirements on the executors of the estates of U.S. decedents, while also considering the effect of the open-ended Offshore Voluntary Disclosure Program (OVDP), offered by the IRS as an option to seek resolution of prior filing mistakes or omissions.

ABA Source Link: Foreign Trusts: Form 3520 and From 3520-A—Filing Deadlines and Liability of a Decedent’s Estate

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